A “gray divorce” is a divorce between spouses who are 50 years of age or older. Although the overall divorce rate has declined over the last 20 years, the gray divorce rate has doubled. And people over 50 who have been married more than once are 2.5 times more likely to divorce. Because spouses in a gray divorce are in a different stage of their lives than younger spouses, there are some special considerations for those going through or considering a gray divorce, including retirement savings, insurance, Social Security and estate planning.
Many factors have likely contributed to the increase in gray divorces. Some couples may have postponed their divorce until after their children are grown or because of financial considerations. Others may find that with an “empty nest,” their marriage is no longer strong enough to survive. Still more find that after retirement, their interests and lifestyles are no longer compatible. Two out of three gray divorces are initiated by women; perhaps because women are more likely to be financially independent than in decades past.
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In all divorces, but especially in gray divorces, it is important to protect beneficiary interests, insurance coverage and financial accounts while the divorce is pending. The court will often enter restraints on these accounts to protect the interests until the divorce is finalized.
Retirement savings become especially important in a gray divorce. It is best to try to avoid accessing retirement savings before retirement if possible. Spouses in a gray divorce have fewer working years left to contribute to separate retirement savings accounts, and less time to recover from any depletion of retirement accounts. Early withdrawals from retirement funds can result in penalties and fees for withdrawals before age 59 ½ as well as potential increased taxes and delays in retirement.
Both spouses may have to delay their retirement or adjust their standard of living to either contribute more to their savings now or to live on less after retirement.
Social Security rules are complex, and a gray divorce or later remarriage can both affect your benefits. Although the court cannot divide Social Security benefits at trial, many people going through a gray divorce may qualify for benefits based on their spouse’s earning history.
Under current Social Security rules, in order to qualify for benefits based upon a former spouse’s record, you must have been married for at least 10 years before divorcing; be at least 62 years old; remain unmarried; have a former spouse who is qualified for benefits; and be qualified for a lesser amount of benefits based on your record.
Health and life insurance
The costs of health insurance can be a major consideration for spouses going through a gray divorce. Once divorced, spouses cannot remain on each other’s health insurance plans. Medicare may be an option for spouses who qualify, but the cost of health insurance can be a major consideration in a gray divorce, especially for a stay-at-home spouse who may be facing purchasing private insurance.
Because of this, some couples consider a legal separation instead of a divorce in order to maintain the option of sharing health insurance while still dividing property and debts. Long-term care costs, such as nursing home care, should also be considered as those costs can significantly deplete a spouse’s assets. In addition, if there is any concern about the competency of either spouse, you should consider whether a guardian ad litem — someone who represents that party’s interests — should be appointed in the divorce process.
Life insurance is another consideration for spouses in a gray divorce. When there is an award of spousal support or alimony, it is common to secure that award with a life insurance policy naming the receiving spouse as beneficiary in the event the paying spouse dies first.
It is important to consider estate planning before and after a gray divorce. If you fail to update your estate plan during a divorce, your current spouse may inherit everything upon your death. After divorce, spouses will likely wish to protect their property for their children’s inheritance.
In addition, it is important to update healthcare directives, powers of attorney, and beneficiary designations to ensure that your wishes are followed. In the event of a future marriage, it may be prudent to keep your property, finances, and debt separate in the new relationship to continue to protect your assets after your divorce.
If you are considering a gray divorce, you are not alone. You should review your financial accounts, property and debts and meet with an experienced family law attorney, accountant and possibly a financial planner, to help determine how to best protect yourself and your future.